Business owners unsure of impact of 'E Fairness' law

SPRINGFIELD -- Bonnie Jemison says big online retailers should collect sales taxes on purchases in Illinois, whether or not they sell quilting patterns in the state.

TIM LANDIS

SPRINGFIELD -- Bonnie Jemison says big online retailers should collect sales taxes on purchases in Illinois, whether or not they sell quilting patterns in the state.

“To be honest, I’m not sure what they sell,” said Jemison, owner of Sew Unique in Springfield.

Regardless, she says she must charge sales taxes when she sells items online – sales that have grown to 20 percent of her pattern-and-accessory business in two years. Her shop at 1050 North Grand Ave. W. has been in business for 13 years.

Jemison is among local shop owners who say it’s a matter of fairness that online retailers such as Amazon.com and Overstock.com should collect state sales taxes on purchases made through Illinois affiliates, as a new state law provides

But they also say they doubt the requirement will result in much immediate benefit for local storefronts.

Immediate fallout

Reaction from Amazon and Overstock was swift after Gov. Pat Quinn signed the “E-Fairness Law” this month requiring sales tax collections on purchases made by Illinois consumers.

Company executives announced they would drop their Illinois affiliates as of May 1 and would no longer accept referrals or pay commissions in Illinois.

Overstock president Jonathan Johnson told The Associated Press the Illinois law is unconstitutional because his company does not have a physical presence in the state. Johnson also predicted the law would drive retailers to states that do not charge sales taxes.

Almost as quickly, Illinois’ chief economic development agency and a retail association arranged for a new website — www.standwithmainstreet.com — to help former Amazon and Overstock affiliates can connect with brick-and-mortar companies.

“By using this website, affiliates who were left out in the cold by Amazon and Overstock can find retailers who want their business,” David Vite, president of the Illinois Retail Merchants Association, said in announcing the website.

The association and the Illinois Department of Commerce and Economic Opportunity cooperated on the venture.

Fraction of sales

George Rishel, owner of The Sly Fox bookstore in Virden, said he has sold books from his store on Amazon Marketplace for several years.

Rishel said his bookstore is not considered an “affiliate,” because he uses it only as a listing service for a handful of books.

“Sometimes, I have books that they don’t have or have signed copies of books that they don’t have,” Rishel said.

The sales are a small fraction of his overall business, but he has been careful to include sales tax charges, even though Amazon did not. Amazon also takes its cut of each transaction, of course.

“They take a nice big chunk,” Rishel said. “It varies by the price that you put on it. But if it’s a $20 book, they may take as much as $6 in fees.”

Rishel said he started online sales about a year after he opened the shop in 1998.

Sales grew the first few years, he said, but have remained relatively flat for much of the past decade. Rishel doubts that the new Illinois law will put much of a dent in Amazon or Overstock sales in the state.

“Items on Amazon have deep discounts,” he said. “I doubt that very many potential customers would forgo buying on Amazon and opt instead for the local store, as long as the total price represents a savings.”

Drum sets, chocolate

A decade into business, Daddy O’s Music Shack owner Doug Antonacci said competition from big online retailers has become a fact of life for local music stores. But online sales also are a growing share of business at his shop at 1405 Stevenson Drive.

“They are our competitors. They sell a lot of the same things that we do,” said Antonacci, who said most of his online sales are through eBay.

While it is early, Antonacci thinks the new state law should help small brick-and-mortar shops such as his remain competitive.

Pease’s Candy owner Rob Flesher, however, has his doubts about the law.

“They (online retailers) were selling candy, and they didn’t have to collect sales taxes. We may pick up some of those sales,” said Flesher, but he’s concerned that the law will be seen as yet one more tax after the state already raised income taxes.

“It’s another strike against the state,” said Flesher.

He said his company ships candy nationwide through online sales and some overseas. Flesher said online purchases still account for only 2 percent to 3 percent of sales, but they are a nice addition to the bottom line, especially at the holidays.

“In December, it’s like having an extra store,” Flesher said. “We probably do half of our online sales in December.”

Tim Landis can be reached at (217) 788-1536.

About the law

Gov. Pat Quinn signed the “E Fairness Law” on March 10. It requires online retailers to collect sales taxes on purchases made in Illinois, including through affiliates. The Illinois Department of Revenue estimated the law would have raised $153 million if the state’s 6.25 percent sales tax had been applied to online sales in 2010.

Self-reporting sales taxes

Illinois consumers who self-report sales taxes for online purchases have two options on state tax forms this year.

In addition to computing the 6.25 percent sales tax on 1040 forms, a line has been added that allows payments based on adjusted gross income, said Sue Hofer, spokeswoman for the Illinois Department of Revenue.

“There is a worksheet, and basically it averages about $3 for every $10,000 in adjusted gross income,” Hofer said. “If you shop online relatively frequently, but you don’t keep receipts, this will show you what you probably owe.”

The department estimates the alternative will bring in $10 million to $12 million a year.

A tax amnesty for online purchases approved by the state legislature continues through Oct. 15 this year. Hofer said the amnesty applies to unpaid taxes for purchases made between July 1, 2004 and Dec. 31, 2009.